World stock funds start year with record high demand -TrimTabs

March 04, 2013|Reuters

NEW YORK, March 4 (Reuters) - Funds that invest in worldstocks attracted $55.1 billion in new cash from investors in thefirst two months of the year, a record sum according to researchfirm TrimTabs Investment Research.

The funds, which include mutual funds and exchange-tradedfunds based in the United States that hold world stocks,exceeded the previous two-month record of $49.1 billion at thestart of 2006, the research firm said.

Investors worldwide have poured large sums of cash intostock funds so far this year, showing a renewed appetite forrisk after seeking the safety and stable returns of bonds in2012.

The record two-month inflow into global equity funds at thestart of this year began with a record monthly inflow of $34.4billion in January, TrimTabs said. Demand fell somewhat inFebruary, but remained high with inflows of $20.7 billion, thefirm added.

Global equity funds hold stocks of companies based aroundthe world, including those in the U.S. Demand for global stockfunds modestly exceeded inflows into global bond funds, whichtook in $50.7 billion in the first two months of 2013, accordingto TrimTabs.

Global equity funds also attracted more new cash than fundsthat hold only U.S. stocks, which took in $37.9 billion overJanuary and February, the report added.

The greater demand for global stocks came despite theoutperformance of U.S. stocks compared to world stocks. Thebenchmark S&P 500 rose 6.2 percent through February,whereas the MSCI all-country world equity index rose 4.32 percent.

Funds that hold U.S. stocks also delivered stronger returnsthan funds that hold global stocks. U.S.-focused stock fundsearned an average 6.2 percent through February, TrimTabs said.That bested the average performance of 2.4 percent from globalequity funds, the report added.

"The U.S. economy, for the typical household, is not verygood," said David Santschi, chief executive officer of TrimTabs.He cited pressure on consumers stemming from higher taxes andgas prices.

"They see the growth prospects being better overseas,"Santschi added with regard to stock markets outside of the U.S.

The big inflows at the start of this year could, however, bea warning to investors that demand has reached its peak,Santschi said.

"When fund flows become extreme, it suggests that the marketis topping," he said.